Mexico's trade platform: has it delivered? Mexico, a manufacturing powerhouse has the challenge to diversify its export markets.

Author:Franco, Arturo
Position:COUNTRY REPORT: MEXICO
 
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Last month, when Brazilian ambassador Roberto Azevedo won out over Mexico's Herminio Blanco to read the World Trade Organization, many in the country reacted with disbelief. If there were an award for the nation most devoted to international trade, Mexico would surely nab it. To this day, the country has signed free trade agreements with more than 40 countries and can access a potential market of over 1 billion consumers. Beyond its intimate relationship with the world's largest export market, the United States, Mexico prides itself on being one of the most connected commercial players globally, reaching over 60 percent of the world's GDP.

Thanks to trade, the country has become the largest producer of smartphones and the fourth-largest exporter of mobile phones, accounting for 65 percent of Blackberry's worldwide production. It is also the ninth-leading producer and the sixth-leading exporter of motor vehicles in the world. Furthermore, Mexico is the largest recipient of investment in aerospace projects in the world, with over 200 aerospace companies based there. Some of the engineers that participated in designing the engine for the Airbus 380, the world's largest mass-produced aircraft, were based in Mexico.

Yet, despite this ongoing commitment to openness and trade liberalization, something seems to be missing. The diversification of Mexican exports to new markets in the fast decade has been modest, if not absent. According to data from Mexico's Central Bank, the share of total exports to the U.S. decreased from 90 percent in 2000 to 82 percent in 2012, with a slight increase in exports during the last decade to South America and Asia. Last year, Mexico had a trade surplus with only three countries: the United States, Guatemala, and, for the first time, Brazil So, why has Mexico not taken full advantage of its impressive trade platform?

NAFTA, TWENTYYEARS LATER

The country's privileged geographic location, and close ties to the U.S. and Canada, might be part of the reason. The North American Free-Trade Agreement (Nafta) was groundbreaking. It was the first comprehensive free trade arrangement between advanced countries and a developing economy, and it created the largest free trade area in the world in terms of total GDP, and the second largest in terms of total trade volume. The agreement also gave Mexico a head start in entering the coveted U.S. consumer market. As a result, Mexico's trade as a percentage of GDP increased sharply...

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